Criticism of Drug Benefit Is Simple: It's Bewildering

By ROBERT PEAR and ROBIN TONER

Published: June 22, 2003

WASHINGTON, June 21 — With both houses of Congress poised to pass a Medicare drug bill next week, lawmakers are increasingly anxious about the complexity of the legislation and its reliance on new and largely untested arrangements to deliver drug benefits to the elderly.

This complexity, they say, may be daunting and confusing to beneficiaries, and even to insurance companies, which are supposed to manage the new benefits. Many lawmakers say they have just begun to examine the bill's intricate details and the web of political compromises behind those provisions.

Senator Larry E. Craig, Republican of Idaho, lamented the bill's "high level of complexity and prescriptiveness." Senator Hillary Rodham Clinton, Democrat of New York, said it would create "a Medicare maze, a whole new bureaucracy."

Under the legislation, the elderly would face a series of decisions. They could stay with traditional fee-for-service Medicare or join a private plan. They could get care through a preferred provider organization, a health maintenance organization or other private plans, all conceivably with different rules and benefits, but supervised by a new federal agency.

If beneficiaries choose to stay with traditional Medicare and want to obtain drug coverage, they would buy it through private insurers offering "drug only" plans, a form of insurance that is not now generally available. The coverage and the premiums could vary, depending on the plan, as long as the "actuarial value" is equivalent to that of standard coverage described in the legislation. If fewer than two private plans enter a geographic region, the government would step in, under the Senate bill, and offer a "fallback plan." And much of this could change each year.

"You can have a circumstance in which a senior is in four different plans in four years, with different co-pays, different premiums and different drugs provided for, with different rules about what druggist they can go to," said Senator Kent Conrad, Democrat of North Dakota. "That's a lot of chaos and a lot of confusion."

Despite his reservations, Mr. Conrad is one of many Democrats who plan to vote for the bill, which they see as an opportunity to get $400 billion worth of assistance for the elderly in the next 10 years. Republicans see it as a chance to inject market forces into Medicare while showing their commitment to the elderly on an issue that has long favored Democrats.

The goals sound simple, but translating them into practice is difficult. The House and Senate bills are studded with arcane language like actuarial equivalence, risk corridors and sliding-scale premium subsidies.

Much of the complexity results from an effort to find a grand compromise on one of the longest-running divisions in American social policy: how much to trust the government and how much to trust the market. New rules to protect beneficiaries are grafted onto a bill intended to create a vibrant new health insurance market for the elderly.

The House and the Senate, urged on by President Bush, are expected to pass similar versions of the legislation before the Fourth of July recess, leaving differences to be ironed out in later weeks.

Some lawmakers point out that complexity is nothing new in American health care. "Medicare, by definition, is an incredibly complex mosaic," said Senator Judd Gregg, Republican of New Hampshire. "It's got tens of thousands of moving parts. Any legislation dealing with it will have to be complex."

Still, lawmakers say, the 654-page Senate bill is a formidable challenge. "No one understands what the heck this bill says or will do," Mr. Gregg said as he emerged from a Republican caucus this week.

Representative Cal Dooley, Democrat of California, said, "People will have to have an accountant to figure out what the premiums are and what the benefits are." Representative Sherrod Brown, Democrat of Ohio, said he was "still trying to understand the Rube Goldberg way the bill was put together."

Senator Trent Lott, Republican of Mississippi, a strong critic of the bill, said, "You're going to make a huge change in an entitlement program, and you don't even know how it would work, if it would work."

Mr. Bush and Republicans in Congress say the government can pay for prescription drugs, but it must not set prices. Democrats say Medicare should use its vast purchasing power to get the best prices it can. The legislation reflects both aims.

Edmund F. Haislmaier, a health policy analyst at the Heritage Foundation, a conservative research organization, said he was amazed at "the intricacy of the statutory provisions and the breadth of the regulatory authority" given to federal officials under the Senate bill.

For example, he said, insurers and health plans would negotiate prices with drug companies. The government would calculate "the average negotiated price" for each drug dispensed to Medicare beneficiaries each year. Medicare could refuse to pay costs exceeding the average.

Finding a middle way between a government-run program and an unfettered private market will mean big changes for beneficiaries.

Under existing law, most Medicare beneficiaries pay the same premium, $58.70 a month, and have access to the same benefits. By contrast, under the bills speeding through Congress, the drug benefits could vary. Conservatives say they hope insurers will vie with one another to offer different packages of drug benefits tailored to the needs of different beneficiaries.

Budget constraints have created some confusing anomalies. The House and Senate bills both include a gap in coverage, known as a doughnut hole. Beneficiaries would pay premiums every month, but would not receive insurance for drug expenses in a certain range: $4,500 to $5,813 a year under the Senate bill, $2,000 to $4,900 under the House bill. Coverage would resume after drug costs exceeded those levels.

A major goal of the Medicare bill for many lawmakers is to encourage private health plans known as preferred provider organizations. But after studying the complex payment formula, preferred provider organizations cannot say whether it would be economically feasible to operate in the Medicare market. "The legislation includes a lot of very creative and complex ideas," said Diana C. Dennett, executive vice president of the American Association of Health Plans. "It's taking time to understand how all the pieces fit together."

Here is one example, from the Senate bill, that illustrates the complexity: The new benchmark for paying preferred provider plans would be the greater of local fee-for-service costs (excluding graduate medical education) or the amount now paid to health maintenance organizations for each Medicare beneficiary.

Senator Craig, the chairman of the Senate Special Committee on Aging, said: "The bill unwisely imposes a ceiling, or benchmark, on the amount the federal government will pay the new Medicare plans. It creates an unnecessarily heavy-handed and restrictive bidding system."

Still, health policy experts said, big social programs have often been enacted in a flawed or confusing form, and Congress tinkers with them in later years. "The history of most great social legislation in our country, including Medicare and Medicaid, is ready, fire, aim," said Drew Altman, president of the Kaiser Family Foundation. "The difference here is that there's such sharp disagreement about the direction we are aiming in."